Absolute or relative deficits in the functioning mass of insulin-producing pancreatic beta-cells lead to the development of diabetes mellitus. Current therapies for diabetes do not restore physiologic insulin secretion and leave residual hyperglycemia with its attendant complications. Novel therapeutic strategies are needed to restore insulin production and functioning beta-cell mass. Hedgehog signals are important regulators of pancreas development, cellular differentiation and proliferation. Recently we discovered that hedgehog signaling is active in adult pancreatic islets and regulates the expression of the insulin and islet duodenum homeobox-1 (IDX-1) genes. IDX-1 is essential for the normal development of the pancreas and functions in the differentiation of new pancreatic beta-cells from progenitors and functions in the differentiation of new pancreatic beta-cells from progenitors in the adult pancreas (neogenesis) Because both the insulin and the IDX-1 genes are essential for the differentiation of new pancreatic beta-cells, we propose the hypothesis that hedgehog signals regulate the development of pancreatic beta-cells in the adult pancreas. The recent identification of pancreatic ductal-derived and islet-derived stem/progenitor cells by the Bonner-Weir and Habener laboratories provides cellular model systems for studies of beta-cell differentiation to complement mouse models of pancreas development and neogenesis. The outlined studies will address the following specific aims: 1) to explore mechanisms by which hedgehog signaling regulates the expression of the homeodomain protein IDX-1, 2) to examine the role of hedgehog signaling in the differentiation of pancreas-derived stem/progenitor cells into beta- cells, and 3) to analyze hedgehog signaling functions in pancreatic beta-cell development in vivo. Exploring the hedgehog signaling pathway in pancreatic beta-cells is a promising experimental approach to restore the functioning mass of insulin-producing cells in individuals with diabetes. This project (Project 3) will form one component of the Beta Cell Biology Program based at Harvard Medical School with highly interactive collaborative interfaces among the program investigators and core laboratories.